9911796707
TMI Blog2024 (9) TMI 266X X X X Extracts X X X X X X X X Extracts X X X X ..... ctivities. We are of the opinion that it will deem fit and proper in these peculiar facts and circumstances that a lump sum disallowance @ 25% in head of the Travelling Expenses would be just and proper. We make it clear that our instant estimation based in these peculiar facts would not be taken as a precedent in any preceding or succeeding assessments. The Ld.AO is accordingly directed to re-compute the impugned disallowance @ 25% and make necessary adjustment in the income of the assessee. Addition u/s 41(1) - outstanding sundry creditors - Assessee submitted where the amounts were shown as liability in the balance sheet and there was no evidence / material to indicate cessation of liability, the addition cannot be made u/s 41(1) simply on the ground that the liability is outstanding for more than 3 years and the same is barred by the limitation - HELD THAT:- As perused the material on record such as copy of ledger accounts, Audit Report, copy of Return along with computation of account placed on record that amount shown as liability in this relevant assessment year. As noted that the impugned amount as income in the subsequent year and offered the same for tax in the return of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same. 3. The learned Assessing Officer has erred in law as well as on facts in making disallowance of Rs.2,38,411/- on account of travelling expenses and the learned CIT(A) has also erred in law as well as on facts in confirming the same. 4. The learned Assessing Officer has erred in law as well as on facts in making addition u/s 41(1) of Rs. 78,350/- on account of outstanding sundry creditors and the learned CIT(A) has also erred in law as well as on facts in confirming the same. 5. The learned Assessing Officer has erred in law as well as on facts in making disallowance of Rs.1,18,978/- on account of motor car expenses and depreciation and the learned CIT(A) has also erred in law as well as on facts in confirming the same to the extent of Rs.23,795/-. 6. The learned Assessing Officer has erred in law as well as facts I making disallowance u/s. 40A(2)(b) of Rs.40,737/- on account of excess interest payment and the learned CIT(A) has also erred in law as well as on fats in confirming the same. 3. The case of the facts in brief are that the assessee is a partnership-firm engaged in the business of trading and export of various ceramic products during the year under appeal. Thea ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act on account of non-deduction of TDS. 3.4 The Ld.AR for the assessee submitted that Hardship Shipping Logistics Pvt. Ltd. was only an agent and the freight beneficiaries were non-resident Shipping Companies and therefore, in view of CBDT Circular No. 723 dated 19.09.1995, the provisions of Section 194C or 195 of the Act would not apply to the said amount as the said payment will be governed by the specific provisions of section 172 of the Act. For ready reference the Board Circular is reproduced: Circular No. 723 TAX DEDUCTION AT SOURCE FROM PAYMENT MADE TO FOREIGN SHIPPING COMPANIES CIRCULAR NO. 723, DATED 19-9-1995 1. Representations have been received regarding the scope of sections 172, 194C and 195 of the Income-tax Act, 1961, in connection with tax deduction at source from payments made to the foreign shipping companies or their agents. 2. Section 172 deals with shipping business of non-residents. Section 172(1) provides the mode of the levy and recovery of tax in the case of any ship, belonging to or chartered by a non-resident, which carries passengers, livestock, mail or goods shipped at a port in India. An analysis of the provisions of section 172 would show that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. While disbelieving that Hardship Shipping Logistics Pvt. Ltd. was an agent non-resident principal, has not disputed that fact that the assessee paid ocean freight to Hardship Shipping Logistics Pvt. Ltd. for export of goods through non-resident shipping companies namely Safmarine of Denmark and Maersk of USA. The Assessing Officer has also not disputed the fact that the ultimate beneficiaries of such ocean freight was above named non-resident shipping companies. The rationale of CBDT Circular No.723 dated 19.09.1995 was clearly attracted and the provisions of Section 194C were not applicable. The stand of the Ld.AO is like accepting one side of a coin while disbelieving the other obvious side of the same coin. It is submitted that the disallowance of Rs.7,20,554/- made by the Ld.AO u/s 40(a)(ia) is not sustainable. M/s Hardship Shipping Logistics Pvt. Ltd included the amount in their income and has also paid due taxes thereon. In support of this, we are enclosing herewith a certificate of the Chartered Accountant of M/s Hardship Shipping Logistics Pvt. Ltd. in the specific format prescribed under Income Tax Rules, 1962. Certificate of accountant under first proviso to sub-sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Ld.CIT(A) upholding the disallowance and further submitted that record does not show that test whether the assessee is entitled for non-deduction of tax benefit under Section 172 of the Act. That Section 40(a)(ia) of the Act has retrospective effect. CA certificate is not meaningful. According to Hon ble Kerala High Court Section 40(a)(ia) of the Act give concession to assessee in case receipt of the amount had already paid tax as such amount is applicable w.e.f. 01.04.2013. Ld. D.R. relied on the following judgment: (i) P.M.S. Diesels vs. CIT-2, Jalandhar (59 taxmann.com 100 (Punjab Haryana High Court), wherein the Hon ble Court has held as follows: The first proviso to section 40(a)(ia) alleviated to a great extent the burden on the tax payer who had defaulted in deducting the tax at source. The proviso contemplates a situation where there was a failure to deduct tax at source. As mentioned earlier, the liability to deduct tax at source would arise in the case of an assessee following the cash system only upon payment of the amount to the payee/contracting party and in the case of an assessee following the mercantile system, upon the assessee crediting such sum to the account o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irajlal and Smt. Divyaben accompanied the partners of the assessee etc. The information available on books of the assessee that have only export business with the country of Jordan. No other countries assessee having any business transaction or relation. Other two entities who accompanied with Shri Gautambhai that they are neither partner nor employee of the assessee-firm. The expenditure made are not allowable u/s 37 of the Act which is hereby disallowed and added back to the total income of the assessee u/s 37 of the Act. The Ld.CIT(A) has sustained the addition while observing that appellant has failed to establish any business relation to such travelling expenses as relatable to appellant s business activities, copy of ledger invoice placed on record. 7.2 According to Ld.AR of the assessee, the disallowance of entire expenses by the Assessing Officer is completely unjustified and unsustainable as the parts of the expenses were incurred in respect of partner of the firm. The assessee relied upon the following decisions wherein the disallowance on account of foreign travelling expenses was restricted to 10% to 25% as against the disallowance of entire expenses: (i) Crescent Organ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compute the impugned disallowance @ 25% and make necessary adjustment in the income of the assessee. 10. That the assessee raised Ground No. 3. That the Ld. AO has erred in law as well as on facts in making addition u/s 41(1) of Rs. 78,350/- on account of outstanding sundry creditors. The Ld.AO notices that there were outstanding liabilities for more than three years on account of following sundry creditors namely: (i) M/s. Gurukrupa Heavy Lifters Rs. 38,700/-, (ii) M/s. Gurukrupa Frieght Carrier Rs. 39,650/-. 10.1 The Ld. AO made addition of Rs.78,350/- on account of sundry creditors due to non-furnishing of M/s Gurukrupa Freigth Carriers of Rs.39,650/- M/s Gurukrupa Heavy Lifters of Rs.38,700/- is hereby disallowed because and added back to the total income which comes to Rs.78,350/-. No evidenced with any supporting proofs. It is clear that liability of the assessee has not ceased during the year the assessee continuously sharing balance in bank account. The Ld.CIT(A) observed that appellant s claim to consider such write off in subsequent years is neither justifiable nor the same is evidence with any supporting proofs of such working to establish the same as taxable only AY 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fered the same for tax in the return of income for AY 2013-14 filed on 26.09.2013, i.e. before passing the assessment order on 16.03.2015 copy of relevant documents placed on record in Paper Book Page No. 36-42. Thus, the amounts to taxing the same amount twice and double taxation which is completely impermissible under the Act. That, the evidences are received shows that the assessee has shown Rs.78,350/- as income in subsequent year and paid taxes accordingly. We, therefore, delete the addition of Rs.78,350/-. The Ld.AO is directed accordingly. 13. That the assessee raised Ground No. 4 regarding disallowance of Rs.1,18,978/- on account of motor-car expenses and depreciation. The assessee incurred motor car expenses of Rs.66,218/- and claimed depreciation on motor car of Rs.52,760/- totaling to Rs.1,18,978/-. Thus, disallowance at the rate of 20% on account of personal use. 13.1 The Ld. AO made addition of Rs.1,18,978/-as assessee not only used this car for business but also personal purpose. In the business activities personal element of car using cannot be ruled out, for motor car expense of Rs.66,218/- M/s Motor Car Rs.52,760/- total expenses come to Rs.1,18,978/- in which 20% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of motor car expenses. This ground of assessee s appeal is partly allowed in above terms. 16. That the assessee raised Ground No. 5 regarding disallowance of Rs. 40,737/- on account of excess interest payment under Section 40A(2)(b) of the Act. 16.1 The Ld.AO made addition of Rs.40,737/- on account of Smt. Savitaben Gopaldas Khant had granted 18% interest, however, limitation of interest allowable come to 12% as such excess granted interest 6% amounting to Rs.40,737/- is hereby disallowed which covered u/s 40A(2)(b) of the Act. The Ld.CIT(A) has sustained the addition and upheld the observation of Ld. AO @ 18% of interest as charged. 16.2 The Ld.AR for the assessee submitted that the assessee paid interest of @ 12%. However, where the assessee paid interest @ 18% to Smt. Savitaben Gopaldas Khant, wherein interest paid excessive of 6% (i.e. 18% 12%) and proposed to make the disallowance under Section 40A(2). He relied upon the decision of Hon ble Jurisdictional High Court in the case of CIT vs. Sarjan Realities Ltd. (50 taxmann.com 52), wherein it was held that solely because the assessee had paid interest at different rates to different parties, that itself could not be a ground to ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
